Banks slow to cut mortgage rates, says English

Reserve Bank Governor Alan Bollard cut the Official Cash Rate to a record low of 2.5pc last week. Photo / Mark Mitchell

Banks have been "fairly slow" in dropping their mortgage rates, Finance Minister Bill English said today.

There has been criticism of the major trading banks for not lowering their rates further and faster as the Reserve Bank whittled the official cash rate down to a record low of 2.5 per cent and signalled it would stay down some time.

The major banks' current floating mortgage rates are between 6.4 per cent and 6.5 per cent.

The banks argue that the rates they can offer are being driven by the cost of borrowing.

They also say this explains why they offer lower rates across the Tasman despite a higher cash rate there.

English said the Government was keeping a watching brief on the issue.

"They do appear to be fairly slow. They're running an argument that the cost of their funding is rising but we will be keeping an eye on it and the governor of the Reserve Bank is keeping an eye on it," English said.

"We want to see the benefits of the low cash rate pass through to people with mortgages because that will help underpin the economy and underpin jobs."

The Reserve Bank's message about rates staying down to the end of next year was a "pretty clear signal" a lower interest rate structure was possible.

- NZPA